Oil Conflict Has Drilled A $2.4 Billion Hole In Sudan's Finances

KHARTOUM (Reuters)
- Sudan's dispute with its southern neighbor over oil transit
fees has created a 6.5 billion pound ($2.4 billion) gap in the
country's public finances and caused exports to plunge 83
percent, the Sudanese finance minister said on Monday.

South Sudan inherited three-quarters of oil production when it
gained independence from the North last July.

But the pipelines are in Sudan and the two have been unable to
agree on how much the South should pay to transport its oil, with
the row escalating into a low-level armed conflict in recent
weeks.

After several rounds of failed talks to resolve that dispute as
well as conflict over border demarcation and citizenship, there
have been fears that full-scale war could break out in one of
Africa's most significant oil regions.

Fighting has eased since Wednesday, when the U.N. Security
Council threatened both sides with sanctions unless they resumed
talks within two weeks.

The row caused South Sudan to shut off 350,000 barrels per day
(bpd) of crude output in January and the South's temporary
seizure of a contested oilfield last month shut down nearly half
of Sudan's 115,000 bpd output.

Sudan's oil minister has since said the Heglig oilfield is
pumping oil again, without specifying production amounts.

Both countries' economies have been crippled by the absence of
oil revenues.

"Not reaching a deal with the government of the South over
transit fees and petroleum servicing has caused a gap in the
public financial sector worth about 6.5 billion Sudanese pounds,"
Finance Minister Ali Mahmoud told lawmakers in an address on
economic performance in the first quarter of 2012.

"Regarding exports, the first quarter of 2012 saw an 83 percent
decline compared to the first quarter of 2011, and this happened
because of the absence of oil."

Oil represents 90 percent of all Sudan's exports.

Mahmoud also said inflation in the first quarter rose to 21
percent from 12.9 percent in the same period last year.